Free Motion for Partial Summary Judgment - District Court of Colorado - Colorado

Case 1:04-cv-00725-RPM

Document 41-14

Filed 07/01/2005

Page 1 of 26

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November 5 , 2001 Dear Shareholder:
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YOUare cordially invited to attend a special meeting of shareholders of The Quizno's Corporation to be held at 1O:OO a.m. local time, on November 30, 2001, at 1O:OO a.m. (Denver time), at the Oxford Hotel, 1600 17th Street, Denver Colorado, 80202. As described in the enclosed proxy statement, at the special meeting, you will be asked to approve a merger of Firenze Corp. with and into us. In the merger, shares of our common stock issued and outstanding immediately prior to the merger, excluding shares beneficially owned by (1) Richard E. Schaden, chairman of our board of directors and our president and chief executive officer, (2) &hard F. Schaden, a member of our board of directors and our vice president and secretary, (3) affiliates and family members of the Schadens, and (4) shareholders validly exercising their appraisal rights, will be converted into the right to receive $8.50 per share, in cash, without interest. The merger has been approved by our board of directors, upon receiving the recommendation of a special committee of independent members of the board. The special committee and the board concluded that the proposed merger is fair and in the best interests of our public shareholders, and therefore, the board recommends that you vote in favor of the merger and adopt the merger agreement. Details of the merger and other important information are described in the accompanying notice of special meeting and proxy statement. You are urged to read these importa'nt documents carefully before casting your vote. Whether or not you plan to attend the special meeting, we urge you to complete, sign, date and promptly return the enclosed proxy card. The merger cannot be completed unless our shareholders approve the merger agreement. We thank you for your prompt attention to this matter and appreciate your support.

Very truly yours, /s/ Richard E. Schaden President and CEO
Your vote is important. Please mark, sign, date and return the enclosed proxy card promptly, whether or not you plan to attend the special meeting. Please do not send in any certificates for your common stock at this time. After the merger is approved, shareholders will receive a letter of transmittal and related instructions.

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TQC00157

Case 1:04-cv-00725-RPM

Document 41-14

Filed 07/01/2005

Page 2 of 26

THE QUIZNO'S CORPORATION
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS To Be Held on November 30, 2001

To the Shareholders of THE QUIZNO'S CORPORATION: GIVENthat a special meeting of shareholders of THE QUIZNO'S NOTICEIS HEREBY CORPORATION ("Quizno's") will be held on November 30, 2001 beginning at 1O:OO a.m. (Denver time) at the Oxford Hotel, 1600 17th Street, Denver, Colorado 80202, to consider and vote on a proposal to approve and adopt the amended and restated merger agreement, dated as of July 2, 2001 between us and FIRENZE CORP.,pursuant to which Firenze will be merged with and into us. A copy of the merger agreement is included in the attached proxy statement as Annex A and is incorporated in the attached proxy statement by reference. We will transact no other business at the special meeting. Any shareholder who does not wish to accept the merger consideration of $8.50 per share and who properly demands appraisal under Colorado law will have the right to have the fair value of his, her or its shares determined by a Colorado court. A COPY of the relevant provisions of Colorado law is included in the attached proxy statement as Annex D. This appraisal right is subject to a number of restrictions and technical requirements described in the attached proxy statement. Only shareholders of record as of the close of business on October 5, 2001 will be entitled to notice of the special meeting and to vote at the special meeting and any adjournment of the meeting. Any shareholder will be able to examine a list of holders of record, for any purpose related to the special meeting, during the period beginning two days after the notice of the special meeting is given continuing through the meeting and any adjournment of the meeting. The list will be available at our corporate headquarters located at 1415 Larimer Street, Denver, Colorado 80202. Approval and adoption of the merger agreement requires the affirmative vote by at least a majority of the outstanding shares entitled to vote at the special meeting.

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By Order of the Board of Directors, /s/ Richard E Schaden Corporate Secretary

Denver, Colorado November 5, 2001

Each shareholder is urged to complete, sign, date and return the enclosed proxy card in the envelope provided, which requires no postage if mailed in the United States. If a shareholder decides to attend the special meeting, he, she or it may, if so desired, revoke the proxy and vote the shares in person.

Case 1:04-cv-00725-RPM

Document 41-14

Filed 07/01/2005

Page 3 of 26

THE QUIZNO'S CORPORATION
PROXY STATEMENT FOR SPECIAL MEETING OF SHAREHOLDERS To Be Held on November 30, 2001 This proxy statement is being furnished to holders of our common stock in connection with the solicitation of proxies by our board of directors for use at the special meeting of shareholders, and at any adjournment of the meeting, to be held at the Oxford Hotel, 1600 17th Street. Denver, Colorado 80202, on November 30, 2001 beginning at 1O:OO a.m (Denver time). The special meeting has been called to consider and vote upon a proposal to approve and adopt the amended and restated merger agreement, dated as of July 2, 2001, between us and Firenze Corp., pursuant to which Firenze will be merged with and into us. A copy of the merger agreement is attached as Annex A. Only shareholders of record on October 5, 2001 are entitled to receive notice of and vote at the meeting. On that record date, there were 2,337,439 shares of our common stock outstanding held by approximately 85 record holders. Each share of our common stock will be entitled to one vote. Holders of shares of our preferred stock have no right to vote at the meeting. The merger must be approved by a vote of a majority of the outstanding shares of common stock. Of those shares, approximately 67% were beneficially owned by Richard E. Schaden and Richard E Schaden. The Schadens have indicated they will vote for the merger, but are not obligated to do SO. A quorum for the meeting requires that holders of a majority of the outstanding shares of common stock must be present in person or by proxy. The board of directors recommends that you vote "FOR" approval of the merger agreement and the merger. Proxies will be voted in the manner you spec@ in the proxy card. If you return your proxy but do not specify how it should be voted, your shares will be voted for the merger. You must sign your proxy. The proxies will be voted in the discretion of the persons named therein regarding the merger and any matters relating to the conduct of the meeting. If your stock is held by a broker or other custodian in "street name," your shares will not be voted unless you provide specific instructions to the custodian. Proxies submitted by custodians who have not received voting instructions will be counted for the purposes of determining a quorum, but will not be voted for or against the merger. Because the merger must be approved by the holders of a majority of the outstanding shares, the failure to vote your shares, including the failure to provide instructions to a custodian, or a decision to abstain from voting, will have the same effect as a vote against the merger. You are urged to complete and return your proxy or, if your shares are held in street name, to provide voting instructions in accordance with the materials you receive from your broker or other custodian. This proxy statement and the accompanying form of proxy are first being mailed to shareholders on or about November 9, 2001. No person has been authorized to give any information or make any representation other than those contained in this proxy statement, and, if given or made, such information or representation must not be relied upon as having been authorized. This proxy statement does not constitute a solicitation of a proxy in any jurisdiction from any person to whom it is unlawful to make a proxy solicitation in such jurisdiction. The information in this proxy statement may only be accurate on the date of this proxy statement. This transaction has not been approved or disapproved by the Securities and Exchange Commission, nor has the commission passed upon the fairness or merits of the transaction nor upon the accuracy or adequacy of the information contained in this document. Any representation to the contrary is unlawful.

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TQC00159

Case 1:04-cv-00725-RPM

Document 41-14

Filed 07/01/2005

Page 4 of 26

TABLE OF CONTENTS
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1 QUESTIONS AND ANSWERS ABOUT THE MERGER ................................... SUMMARY ................................................................................... 4 SPECIAL FACTORS ......................................................................... 8 Background of the Merger ............................................................... 8 Recommendations of the Special Committee and the Board of Directors ................ 13 Reasons for the Merger and Fairness of the Merger ...................................... 14 16 Purposes of the Merger and Plans or Proposals .......................................... 17 Opinion of Tucker Anthony .............................................................. 22 Our Management's Forecasts ............................................................. 24 CAUTIONA.RY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS ..... THE SPECIAL MEETING .................................................................. 25 25 Matters to be Considered ................................................................ . Required Votes ........................................................................... 25 Voting and Revocation of Proxies ........................................................ , 25 25 Record Date: Stock Entitled to Vote; Quorum; Voting at the Special Meeting ..... :..... Appraisal Rights ........................................................................... 26 26 Solicitation of Proxies .................................................................... 26 CERTAIN INFORMATION CONCERNING THE COMPANY .............................. Recent Developments .................................................................... 26 Certain Transactions ...................................................................... 27 Price Range of Shares; Dividends and Stock Repurchases ................................ 28 Summary Unaudited Pro Forma Condensed Financial Information ....................... 29 Interests of Certain Persons in the Merger ............................................... 32 THE MERGER AGREEMENT ............................................................. 34 The Merger .............................................................................. 34 Stock Options, Warrants and Preferred Stock ............................................ 34 Conversion of Common Stock ............................................................ 35 35 Representations and Warranties .......................................................... 36 Covenants ................................................................................ 36 Directors' and Officers' Indemnification .................................................. Conditions to the Merger ................................................................ 37 37 Termination ............................................................................... Effect of Termination ..................................................................... 38 Amendment .............................................................................. 38 Expenses; Termination Fees .............................................................. 38 Fees and Expenses ....................................................................... 38 39 CERTAIN BENEFICIAL OWNERSHIP O F SHARES ...................................... 41 CERTAIN LEGAL MATTERS AND REGULATORY APPROVALS ....................... General .................................................................................. 41 Hart-Scott-Rodino ......................................................................... 41 Litigation ................................................................................. 41 41 MERGER FINANCING ..................................................................... 42 MATERIAL FEDERAL INCOME TAX CONSEQUENCES OF THE MERGER .......... ASSET-LIABILITY ANALYSIS .............................................................. 43 APPRAISAL RIGHTS ....................................................................... 44 45 INDEPENDENT AUDITORS ............................................................... SHAREHOLDER PROPOSALS ............................................................. 45 WHERE YOU CAN FIND MORE INFORMATION ........................................ 45 AVAILABLE INFORMATION ............................................................... 46 Annex A-First Amended and Restated Merger Agreement Annex B-Opinion of Tucker Anthony Sutro Capital Markets Annex C-Asset-Liability Analysis of Tucker Anthony Sutro Capital Markets
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Annex D-Summary of Shareholders Dissenters Rights and Text of Article 113 of the Colorado Business Corporation Act Annex E-Annual Report on Form lO-KSB/A for the Fiscal Year Ended September 30. 2000 Annex F-Quarterly Report on Form lO-QSB/A for the Period Ended June 30, 2001 Annex G-Consent of Tucker Anthony Sutro Capital Markets

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QUESTIONS AND ANSWERS ABOUT THE MERGER The following questions and answers are intended to address briefly some commonly asked questions regarding the merger. These questions and answers may not address all questions that may be important to you as a shareholder. Please refer to the more detailed information contained elsewhere in this proxy statement, the annexes to this proxy statement, and the documents referred to or incorporated by reference in this proxy statement. Who is Firenze? (See pages 4 and 5) 0 Firenze Corp. is a corporation formed by Richard E. Schaden and Richard F. Schaden to acquire us in the merger.
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Richard E. Schaden is our president and chief executive officer, chairman of our board of directors and one of our significant shareholders. Richard F. Schaden is our vice president and corporate secretary, a member of our board of directors and one of our significant shareholders. Richard E. Schaden is the son of Richard F. Schaden. The Schadens are the only directors, officers and shareholders of Firenze. One of our lenders, Levine Leichtman Capital Partners 11, L.P., will continue to hold warrants to purchase up to 14% of each class of the surviving company's capital stock on a fully diluted basis, subject to certain adjustments for issuances, exchanges or repurchases of capital stock by the surviving company, after the merger. Levine Leichtman had no role in the negotiations of the terms of the merger transaction and had no influence on the terms of such transaction. Affiliates of the Schadens, consisting of Frederick H. Schaden, one of our directors, other Schaden family members and a family trust, Levine Leichtman, and one of our executive officers, Patrick Meyers, will also remain as shareholders or option holders with rights to purchase stock of the surviving company.

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What am I being asked to vote upon? (See pages 25 and 26) 0 Our board of directors is asking you to vote to adopt and approve a merger agreement and merger which provides that Firenze will acquire us by merging with and into us, and we will be the surviving corporation. Pursuant to the merger, each share of our common stock, issued and outstanding immediately prior to the merger will be converted into the right to receive $8.50 in cash, without interest, other than shares beneficially owned by: Richard E. Schaden, our chief executive officer and president; Richard E Schaden, our vice president and corporate secretary; affiliates of the Schadens; and holders who have validly exercised their appraisal rights. What will I receive in the merger? (See pages 34 and 35) 0 You will be entitled to receive $8.50 in cash, without interest, for each share of common stock owned by you.
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Why is the board of directors recommending that I vote for the merger? (See pages 13-19) In the opinion of the board of directors, based upon the unanimous recommendation of the special committee of the board, the terms and provisions of the merger agreement and the merger are fair to and in the best interests of our public shareholders, who are all shareholders other than the Schadens and their affiliates. The board has approved the merger agreement. and the merger and declared it .fair to and in the best interests of our public shareholders. At that board meeting, Richard E. Schaden and Richard F. Schaden were not present. Frederick Schaden attended the board meeting for quorum purposes only and abstained from discussing and voting with respect to the merger and the merger agreement.
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The price of $8.50 per share is a 12% premium over the average closing price for the shares on the Nasdaq SmallCap Market for the six month trading period ended June 21, 2001. In addition, the price is a 15% premium over the closing price for the shares on May 21, 2001, the date before we publicly announced the merger proposal, a 11% premium over the closing price for the shares on June 21, 2001 the date before we announced the execution of the merger agreement, and a 26% premium over the closing price of the common stock on November 9, 2000 the trading date before we announced our tender offer. How will Firenze finance the merger? (See pages 41 and 42) Firenze intends to finance all of the merger consideration from the cash held by us. Certain of this cash consists of funds borrowed under our credit facility with Levine Leichtman. Since the Schadens are the sole shareholders of Firenze, what conflicts of interest should I be aware of in evaluating the board of directors' recommendation of approval of the merger agreement and the merger? (See pages 32 and 33)
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The Schadens, as officers and members of our board, have a direct conflict of interest in recommending approval of the merger agreement and the merger because they are the sole shareholders, directors and officers of Firenze. If the merger occurs, the Schadens and their affiliates will beneficially own all of our outstanding common stock. As a result, the Schadens and their affiliates will receive all of the benefit of our future earnings and our increased value and bear the full loss of any decrease in our value, while you will no longer receive any such benefit or bear such risk. Specifically, the Schadens have a direct pecuniary interest in having the merger consideration, both on a per-share basis and in the aggregate, be as low as possible.

What steps did the board of directors take to determine the price per share I will receive in the proposed merger is fair? (See pages 8-16) The board of directors formed a special committee consisting of three directors who had no conflicts of interest with respect to the merger to evaluate and negotiate the terms of the merger agreement with Firenze. The special committee selected and retained legal and financial advisors to assist it in the evaluation and negotiation of the merger agreement and merger, and received a written fairness opinion from its financial advisor. The special committee relied on the opinion of its financial advisor, that as of the date of the merger agreement, and based on and subject to the assumptions, limitations and qualifications contained in that opinion, the merger consideration each public shareholder will have the right to receive is fair, from a financial point of view, to that shareholder. What are the advantages and disadvantages to me of us merging with Firenze? (See pages 16 and 17)
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You will receive an immediate cash payment for your shares of our common stock that represents a premium over market prices in recent periods. This payment will be taxable to you to the extent it exceeds your basis on your shares. You will have the opportunity to reinvest your net of tax merger consideration in other investments. You will not have the opportunity to participate in our future earnings or growth. However, you will not have to bear the risk of a decrease in our value, whether as a result of operating or market factors.

What vote is required to approve the merger agreement? (See page 25)
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The holders of a majority of all outstanding shares of our common stock must vote to approve the merger agreement. As of October 5,,2001, the Schadens beneficially owned approximately 67% of the common stock eligible to vote at the special meeting. The Schadens have indicated that they intend to vote their common stock in favor of the
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TQC00163

Case 1:04-cv-00725-RPM

Document 41-14

Filed 07/01/2005

Page 8 of 26

adoption of the merger agreement although they are not obligated to do so. If the Schadens vote as they have indicated, the merger agreement will be approved and adopted. What do I need to do now? (See pages 25 and 26) Please mark your vote on, sign, date and mail your proxy card in the enclosed return envelope as soon as possible, so that your shares may be represented at the special meeting. What rights do I have if I oppose the merger? (See page 44 and Annex D) 0 You may oppose the merger and seek appraisal of the fair value of your shares, but only if you comply with all of the Colorado law procedures explained on page 44 and in Annex D to this proxy statement. Who can vote on the merger? (See page 25)

If you are a shareholder of record as of the close of business on October 5 , you will be entitled to notice of, and to vote at, the special meeting to adopt and approve the merger agreement and the merger.
Should I send my stock certificates now? (See page 35)

No. After the merger is completed, we will send you a transmittal form and written instructions for exchanging your share certificates.
If my shares are held in "street name" by my broker, will my broker vote my shares for me? (See page 25) 0 Your broker will vote your shares ONLY if you instruct your broker on how to vote. You should follow the directions provided by your broker regarding how to vote your shares. May I change my vote after I have mailed my signed proxy card? (See page 25) 0 Yes, your vote can be changed at any time before the proxy is voted at the special meeting. This can be done in one of two ways. First, just send in a written revocation or another signed proxy card with a later date to Computershare Trust Company, Inc., 12039 W. Alameda Parkway, Suite 2-2. Lakewood, CO 80228, (303) 986-5400, our transfer agent, before the special meeting. Or, second, you may, as long as you, and not your broker, are a record holder of our stock, attend the special meeting and vote in person. When do you expect the merger to be completed? (See page 35) We are working toward completing the merger as quickly as possible. If the merger agreement is approved by the shareholders and the other conditions to the merger are satisfied, we expect to complete the merger on the day of the special meeting. What other matters will be voted on at the special meeting? (See page 25) We do not expect that any other matters will be voted upon at the special meeting. Who can help answer my questions? (See pages 45 and 46)
If you have more questions about the merger or would like additional copies of this proxy statement, you should contact Quizno's Investors Relations, Ms. Sue Hoover, at (303) 359-3330.

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Case 1:04-cv-00725-RPM

Document 41-14
SUMMARY

Filed 07/01/2005

Page 9 of 26

The following summary, together with the previous Question and Answer section, provides an overview of all material information discussed in this proxy and presented in the attached annexes and documents. This summary is not intended to be complete and is qualified by the more detailed information contained elsewhere in this proxy statement, the attached annexes and the documents we refer to in this proxy statement. You are urged to review this entire proxy statement carefully, including its annexes and all documents referenced in this proxy statement. Overview We are furnishing this proxy statement to allow our shareholders to consider and vote on a proposal to approve and adopt the merger agreement and merger. The merger agreement provides that Firenze will be merged with and into us and our public shareholders who do not dissent from the merger will receive $8.50 per share for each share of our common stock that they own at the effective time of the merger. During the time the merger agreement was negotiated and at the time the merger agreement was executed, Richard E. Schaden was the president and chief executive officer and chairman of our board of directors and Richard F. Schaden was our vice president and corporate secretary and a member of our board of directors. The Schadens are also the sole shareholders, officers and directors of Firenze. The Schadens, therefore, have a direct conflict of interest with respect to the proposed transaction. As of the record date, the Schadens own approximately 67% of our outstanding common stock. In light of this conflict of interest, our board of directors formed the special committee. The special committee is composed of three of our directors who were not affiliated with Firenze. The special committee negotiated the terms of the merger agreement on behalf of the board and us. In connection with the execution of the merger agreement, both the board and the special committee determined that the merger and the merger agreement are fair to and in the best interests of our public shareholders. The Quizno's Corporation 1415 Larimer Street Denver, Colorado 80202 (720) 359-3000 We incorporated as a Colorado corporation in 1991 as D&R, Inc. We changed our name to The Quizno's Franchise Corporation in April 1991 and to The Quizno's Corporation in June 1995. We do business as The Quizno's Corporation and Quizno's. In January 1991, we purchased assets of Quizno's America, Inc., which had operated, owned and franchised Quizno's restaurants (directly and through predecessors and affiliates) under the QUIZNO'S" name since 1981. We operate, and offer franchises to individuals or entities to operate, restaurants with carryout facilities that sell submarine and other sandwiches, salads, other food products and beverages and related services. As of November 1, 2001, there were 1,359 restaurants in operation in the United States and internationally, and agreements were in place for the opening of an additional 1,148 franchised restaurants in the United States. During the last three years, we have grown to become the third largest sub sandwich chain in the United States. Additionally, we offer franchises for area director marketing businesses in which the area director acts as our sales representative within a defined geographic area to solicit and identify prospective franchisees, to assist us in locating and securing sites for restaurants within a territory, and to provide additional support before, during and after the restaurants open. Firenze Cop. 1415 Larimer Street Denver, Colorado 80202 (720) 359-3000
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Firenze is a Colorado corporation organized on April 30, 2001 specifically for the merger and has not carried on any activities to date other than those incident to its formation, the negotiation and execution of the merger agreement and the transactions contemplated by the merger agreement. Richard E. Schaden, our president and chief executive officer, and his father, Richard E Schaden, our vice president and the corporate secretary, both of whom are on our board of directors, are the sole shareholders, officers and directors of Firenze.

The Merger EfSect of the Merger (See page 34 and 35)
Pursuant to the merger agreement, Fireme will be merged directly into US and we will be the surviving corporation. The merger will become effective when the articles of merger are duly filed with the Secretary of State of the State of Colorado.

Company stock Options and Preferred Stock (See page 34)
At the effective time of the merger, all stock options held by persons other than the Schadens and their affiliates, whether vested or unvested, will automatically be converted into the right to receive an amount equal to merger consideration in cash, less the applicable exercise price, for each share of common stock subject to such directors stock options. At the effective t h e bf the merger, all stock options held by the Schadens and their affiliates, whether vested or unvested, will be assumed by us as the surviving company. Our authorized and issued Class C and Class E preferred stock existing as of the date of the merger agreement, will be redeemed by Quizno's at a purchase price equal to the merger consideration or the liquidation value of each respective class of preferred stock. Our authorized and issued Class D preferred stock will be redeemed for $3.00 per share.

Conditions to the Merger (See pages 37 and 38)
We and Firenze will not complete the merger unless a number of conditions are satisfied or waived by us and Firenze. These include: the merger agreement has been approved by the requisite vote of the holders of our common stock;
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Tucker Anthony will not have revoked, modified or changed its fairness opinion in any manner adverse to the public shareholders.

Firenze will not be required to complete the merger unless the following conditions are satisfied or waived: we have not experienced and will not be experiencing at the t h e of closing a material adverse change in our business; and persons holding not more than 170,000 issued and outstanding shares of our common stock will have exercised appraisal rights under Colorado law.

Termination of the Merger Agreement (See pages 37 and 38)
The merger may be abandoned, at any time before we and Firenze complete it and before or after you approve it, in the following circumstances: by mutual written consent of Firenze and us; by Firenze if we have breached in any material respect any representation or warranty contained in the merger agreement, or if we fail to perform in any material respect any of our covenants, obligations or other agreements contained in the merger agreement;

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by us if Firenze has breached in any material respect any representation or warranty contained in the merger agreement, or if Firenze fails to perform in any material respect any of its covenants, obligations or other agreements contained in the merger agreement; by us if our board of directors determines, in good faith, after consultation with and based on the advice of legal counsel, that the failure to change its recommendation of the adoption of this agreement and the merger could be expected to constitute a breach of its fiduciary duties to our shareholders under applicable law.

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Opinion of Financial Advisor (See pages 17-22) The special committee retained Tucker Anthony Sutro Capital Markets as its financial advisor to review with the special committee options regarding a second step transaction and to render an opinion as to the fairness of the merger consideration each public holder of common stock will have the right to receive in the proposed merger, from a financial point of view, to that shareholder. On June 21, 2001, Tucker Anthony delivered its written opinion to the special committee that, as of the date of the opinion, and based on and subject to the assumptions, limitations, and qualifications contained in that opinion, the merger consideration each of our public shareholders will have the right to receive in the proposed merger is fair, from a financial point of view, to that shareholder. A copy of Tucker Anthony's June 21, 2001 written opinion is attached to this proxy statement as Annex B. We urge you to read Tucker Anthony's opinion in its entirety. The special committee evaluated whether Tucker Anthony's prior relationship with us, consisting of its outstanding loan to Richard E. Schaden, its role as a broker for our share repurchase program and its representation of us during our 2000 tender offer, created a conflict of interest. After discussion with legal counsel, the special committee concluded that Tucker Anthony's prior representation of us offered strong positive advantages, offsetting the disadvantage of the potential conflict of interest. Merger Financing (See pages 41 and 42) The total amount of cash required to consummate the transactions contemplated by the merger agreement, including payment of related fees and expenses, is estimated to be approximately $8.1 million, which will be paid by us out of our cash on hand. Selected Historical Financial Data We are providing the following historical financial information to aid you in your analysis of the financial aspects of the merger. The following selected financial data is only summary and should be read with our financial statements and the notes to those statements and "Our management's discussion and analysis of financial condition and results of operations" incorporated by reference to this proxy statement. The statement of operations data for the years ended December 31, 1998 and September 30, 1999 and 2000 and the balance sheet data at December 31, 1998 and September 30, 1999 and 2000, are derived from our financial statements which have been audited by our independent auditors. The statement of operations data for the nine months ended June 30, 2000 and 2001 are derived from our unaudited financial statements of which are included elsewhere in this document. Please note that historical results are not necessarily indicative of the results to be expected in the future. See Annex E and Annex F hereto.

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The numbers in the table below are in thousands, except per share data.
December 31, Year Ended September 30, September 30, -2Ooo -(1)

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Nine Months Ended June 3 , 0 2001 2000 -

Statement of operations data: . Revenue ........................ Net income/loss before income taxes .......................... Interest income ................. Diluted net income (loss) ....... Net loss per share ............... Balance sheet data: Cash, cash equivalents and . short-term investments ........ Working capital ................. Total assets ..................... Shareholders' equity. ............

$20,737
$ $ $ $

$20,948
$ 2,088 $ 239 $ (1,527) $ (55)

$41,924
$ 1,982 $ 527 $ 1,073 $ .31

$29,769
$ 1,438 $ 394 $ `823 $ .24

$38,727
$ (1,577) $ 554 $

744 259 892 .26

$(1,133) . (-45)

$ 2,244 $ 2,635

$ 4,891 $ 3,982

$ 7,818 $ 6,322

$ 5,902 $ 4,861

$13,790
$ 4,096

$21,775
$ 2,114

$41,192 $ 2,745

$37,881 $ 2,569

$15,278 $11,408 $52,854 $ (8,709)

(1)In 1999 we changed our fiscal year from December 31 to September 30; as a result our fiscal year for 1999 consists only of nine months.

Market Price and Dividend Information (See pages 28 and 29) On June 21, 2001, the last trading day before announcement of the execution and delivery of the merger agreement, the closing price per share of our common stock on The Nasdaq SmallCap Market was $7.68. On November 2, 2001, the latest practicable trading day before the printing of this document, the closing price per share of our common stock on The Nasdaq SmallCap Market was $8.50. We have never declared or paid cash dividends on our common stock.

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SPECIAL FACTORS
Background of the Merger We were incorporated in Colorado in 1991. In February 1994, we completed an initial public offering of 1,150,000 shares of common stock at $5.00 per share. After our initial public offering, Richard E. Schaden and Richard F. Schaden owned approximately 59.2% of our issued and outstanding common stock. Since our initial public offering, we believe that the public market has not responded to our positive growth and our common stock has remained very thinly traded, providing little liquidity for our shareholders. In addition, because of the low trading volume and illiquidity of our common stock, we have been unable to utilize our common stock effectively as a source of financing. Because we have been unable to realize the principal benefits of public ownership, we have from time to time considered various options, to increase the liquidity of our common stock, or in the alternative, acquiring all outstanding shares of our common stock. On December 29, 1998, Richard E. Schaden and Richard F. Schaden offered to buy all of our outstanding shares of common stock not owned by them for between $7.84 and $8.20 per share. Our board of directors formed a special committee of independent directors, consisting of Mark Bromberg and Brownwell M. Bailey, to evaluate the proposal and to make a recommendation to our full board of directors regarding the acceptance or rejection of the proposal. The Schadens and the special committee discussed and negotiated the proposal throughout the summer, but on August 9, 1999, the special committee reported to our board of directors that the Schadens had withdrawn their proposal, based largely on the inability of the special committee and the Schadens to reach a mutually agreeable price per share. At a special meeting of our board of directors on October 1, 1999, management, which consists of Patrick Meyers, John Gallivan and Richard E. Schaden, expressed its belief that the low trading volume of our common stock limited liquidity for our shareholders. Management believed that our repurchase of common stock would provide better liquidity for our shareholders and recommended that our board consider either an open market share repurchase program or a self tender for the common stock. Our board considered management's recommendation and discussed the possibility of a self tender offer for some or all of the outstanding shares, as well as a more limited share repurchase program. Our board authorized repurchase of up to 200,000 shares. We repurchased 144,005 shares in the open market until September 30, 2000, when we ceased the share repurchase program in order to avoid reducing our net tangible assets below the threshold required for continued listing on Nasdaq. On November 13, 2000, after discussions among management, as described above, independent members of our board of directors, Perkins Coie LLP, our legal counsel and Tucker Anthony Capital Markets, a division of Tucker Anthony Incorporated, our financial advisors at that time, we commenced a tender offer for any and all shares of our common stock at a cash price of $8.00 per share. As part of the tender offer materials, we disclosed that our board could take other actions that would result in a second step transaction in which all the remaining public stockholders would receive cash for their shares. On December 12, 2000, we announced that our tender offer had expired. We purchased 1,699,439 shares of our common stock, including options and warrants to purchase 928,284 shares upon the consummation of our tender offer. We also closed a loan for approximately $12 million principal amount and $1.8 million in pre-paid interest with Levine Leichtman to.finance our tender offer. Since December 12, 2000, we have purchased an additional 51,522 shares of our common stock (including options to purchase 43,622 shares) in private unsolicited transactions in which we were approached by individual shareholders who had wished to tender but failed to do in a timely fashion for various reasons. We paid $8.00 per share in those transactions. On April 11, 2001, at a special meeting of our board, management, as described above, requested that the board explore options to complete a second step to our tender offer, which we

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indicated we may pursue in the tender materials. Management stated that it had been discussing the issues that a second-step transaction would present, and wanted to inform the board of those discussions as well as to seek the approval of the board to continue to explore these options. In conjunction with this discussion, and at the request of our board, Tucker Anthony presented its written preliminary financial analysis of us dated April 11, 2001 and preliminary thoughts on the feasability of a second step to our tender offer. At the April 11 board meeting, the board, including the Schadens, unanimously concluded that we should explore our options to complete a second step to our tender offer. The board made its determination after discussing the merits of the proposed action. The board's determination to evaluate a second step transaction was based, among other things, on: 0 our small public float and limited institutional following; our low trading volume; 0 the Schadens' indication that they were unwilling to sell their shares of our common stock to a third party; the board's conclusion that there is little likelihood that the liquidity of ourscommon stock will improve in the future; and 0 the poor performance of our stock price since our initial public offering. The board then considered the qualifications of its members to serve on a special committee of the board that would be formed to review and evaluate the options for completing a second step, to review, evaluate and negotiate any such proposal received by us and to report final recommendations to the full board. Because the Schadens were expected to remain shareholders of Quizno's, the board determined that the Schadens, in addition to Frederick Schaden, should not serve on the special committee. The board established a special committee consisting of Mark Bromberg, Eric Lawrence and John Todd, all of whom are non-employee directors of Quizno's. Mark Bromberg served on the special committee of our board in 1998. Mr. Bailey, the other member of the 1998 special committee, no longer serves on our board. The board established the compensation of the special committee members $7,500 per member per month. This compensation arrangement was established so that the amount of compensation would not be increased or decreased if the special committee accepted or rejected any transaction proposed by the Schadens. At that time, the special committee authorized the engagement of Brobeck, Phleger & Harrison LLP to serve as the special committee's legal advisor to assist in evaluating the legal issues with completing a second step and to negotiate any proposal received by us. The special committee determined to retain Brobeck due to its expertise and reputation as mergers and acquisitions lawyers and as securities law counsel. Initially, we retained Brobeck in March 2001 to advise the board regarding a potential second-step transaction. The special committee requested that Brobeck instead represent the special committee of the board. The members of the special committee determined that as a result of Brobeck's limited engagement with us there was no conflict of interest in the special committee retaining Brobeck as its legal advisor. The authority of the special committee was not limited in any way by the board. However, the Schadens informed the special committee that they were not interested in selling their shares of our common stock to a third party. As a result, the special committee determined that it would not investigate the possibility of selling our company to a third party because the Schadens would not participate in such a transaction. During April and May, the special committee interviewed several investment banking firms to serve as the special committee's financial advisor for the purpose of evaluating our options to complete a second step transaction; preparing financial analysis of us; advising the special committee with respect to the fairness of any second step proposal received by us; and delivering a fairness opinion to the special committee in connection with any going private proposal. 9
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Firenze was organized on April 30, 2001 by the Schadens as the sole shareholders for the purpose of completing the merger. Moye, Giles O'Keefe, Vermeire & Gorrell LLP have acted as legal counsel to the Schadens and Firenze in connection with the merger and together with Richard E. Schaden negotiated on behalf of Firenze. On May 3, 2001, the special committee received a draft of a merger agreement submitted on behalf of the Schadens contemplating a merger of us with and into our wholly-owned subsidiary. On May 9, the special committee determined it would engage Tucker Anthony Sutro Capital Markets to serve as its financial advisor. The special committee had agreed that the criteria for selection of an independent financial advisor should include: the advisor's expertise and experience in the restaurant industry; the reputation of the advisor; the ability of the advisor to meet the special committee's requirements and timelines; consideration of conflicts of interest; and
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sensitivity to the fee charged, given the relative value of any potential transaction.

The special committee determined that of the investment banks interviewed, Tucker Anthony was in the best position to represent the special committee. The special committee found that Tucker Anthony had a strong knowledge of our financial affairs and business as a result of its representation of us in our self tender offer which would help it to provide prompt and wellreasoned analysis of Quiznos in a cost effective manner. The special committee evaluated whether Tucker Anthony's prior relationship with us, consisting of its outstanding loan to Richard E. Schaden, its role as a broker for our share repurchase program and its representation of us in the 2000 tender offer, created a conflict of interest. After discussion with Brobeck, the special committee concluded that Tucker Anthony's prior representation of us offered strong positive advantages, offsetting the disadvantage of the potential conflict of interest based, in part, on representations by Tucker Anthony to the special committee that it could act independently and that it does not presently expect to derive future revenue from us. The special committee, after having conducted interviews of the potential investment advisors, had indicated to Tucker Anthony that the special committee was likely to retain Tucker Anthony and asked it to be prepared to make a presentation to the special committee if they were in fact retained. In light of this request, Tucker Anthony presented the special committee with its written preliminary financial analysis of us dated May 9, 2001 based on our management's projections as provided on May 4, 2001. With the exception of a change in the upper end of the indicated range from $8.25 to $8.50 per share, this presentation did not differ materially from the presentation to the board on April 11. This change was attributable to updating the financial data and trading multiples concerning comparable companies, the transaction data concerning comparable transactions, and the analysis to reflect changes in the management projections. On May 14, 2001, the special committee met with its legal and financial advisors to discuss the legal ramifications of a second step transaction and review and discuss Tucker Anthony's updated financial analysis of us. At this meeting, Brobeck provided a legal analysis of the potential structures of a second step transaction. After discussion, the special committee determined that any second step transaction should be structured as a merger with a third party corporation. On May 15, 2001, our management informed the special committee that, under the terms of our credit facility, any proposal structured as a merger might be prohibited and suggested that an alternative would be a reverse stock split. After discussing structuring the proposed transaction as a reverse stock split, the special committee determined that it had a strong preference to structure any second step transaction as a merger and informed our management of its preference. In response to the special committee's preference, management approached its lender, AMRESCO Commercial Finance, Inc. and received confirmation that the lender would not oppose any transaction which completed a second step to the December tender offer.
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On May 21, 2001, the Schadens made an offer to the special committee to acquire all outstanding shares of our common stock, other than shares owned by them and certain affiliates for $8.00 per share in order to effect the second step transaction. The transaction was proposed as a merger of Firenze with and into us. On the same date, the Schadens' counsel provided to Brobeck a draft of a merger agreement containing the specific terms of the Schadens' offer. We issued a press release on May 21, 2001 announcing the receipt of the Schadens' offer, the formation of the special committee and the retention of Tucker Anthony.
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During May 2001, the special committee met with Tucker Anthony several times to discuss the proposed merger consideration. During these meetings the special committee analyzed with Tucker Anthony projections which were provided by US. The special committee noted certain discrepancies i the projections provided by management from the projections in our tender offer and instructed n Tucker Anthony to discuss these differences with management and to reconcile the differences. After meeting with our management numerous times, Tucker Anthony orally provided the special committee with a detailed analysis of the current management projections and reconciled them with the projections from our tender offer. Management confirmed to Tucker Anthony that the differences noted by the special committee were the result of changes to our operating budget which had previously been discussed and approved by our board. This analysis was confirmed in subsequent presentations to the special committee. The special committee then determined that it disagreed with certain of management's assumptions, primarily the recurring nature of certain operating expenses and certain obligations relating to cash and restricted cash, used in preparing its management's projections as originally provided and requested that Tucker Anthony revise all its financial analysis of the merger eliminating these assumptions from the original financial model. Our management provided revised projections to Tucker Anthony on May 14, 2001. On May 17, Tucker Anthony presented the special committee with its written preliminary financial analysis of the merger dated May 18 [sic], 2001 based on management's revised projections and an analysis of the differences between the original and revised management projections. With the exception of a change in the indicated range from $7.25-$8.50 to $7.75-$8.75 per share, this presentation did not differ materially from the presentation to the special committee on May 9. This change was attributable to the changes in the management projections, updating the financial data and trading multiples concerning comparable companies and the transaction data concerning comparable transactions. Tucker Anthony applied its experience and judgment to develop those ranges after a review of each of these changes. The ranges, however, were not the result of any mathematical calculation applied to, or any formula weighting of, these changes, or the underlying ranges. At the request of the special committee, Tucker Anthony made an additional presentation of its written preliminary financial analysis dated May 22, 2001 on May 29, which did not differ materially from the presentation on May 17. After discussions with Tucker Anthony about the terms of the proposed merger, the special committee determined to negotiate a higher price than the $8.00 proposed by the Schadens. See also the detailed discussion of the projections discussed under the "Our Management's Forecast" on page 21. On June 6, 2001, the special committee and its legal and financial advisors met with Richard E. Schaden and the Schadens' legal counsel to negotiate the proposed merger consideration. Patrick Meyers, our general counsel, was present at this meeting representing the interests of Quizno's. At the request of the special committee, Tucker Anthony presented its written preliminary financial analysis dated June 6, 2001 to Mr. Schaden and his advisors. This presentation did not differ materially from the presentation made to the special committee on May 29. The special committee stated that $8.00 per share was not sufficient based on the information it had developed with Tucker Anthony, and proposed a price of $8.75. Mr. Schaden responded that they generally agreed with our projections, but that the special committee's counter-proposal was too high. The special committee and Mr. Schaden each held independent discussions after which the Schadens proposed $8.21 per share of common stock. The special committee, after discussion, rejected this offer. After further independent discussions, Mr. Schaden proposed an offer of $8.50 per share. After extended discussion, the special committee tentatively agreed to a price of $8.50 per share.

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On June 8, Richard E. Schaden informed the special committee that he had received a letter from one of our shareholders, indicating that the shareholder may be interested in making an offer to acquire all shares of common stock held by our public shareholders. On June 11. Brobeck, counsel to the Schadens, our general counsel and our special counsel held a teleconference to discuss how to proceed in light of this letter. It was determined that the independent advisors to the special committee along with Schadens' counsel should contact the shareholder to discuss whether it was prepared to make an offer to our public shareholders. On June 12, representatives of Brobeck, representatives of Tucker Anthony and counsel to the Schadens held a teleconference with the shareholder and its legal counsel. In that telephone conference, the shareholder indicated that it was not presenting an offer for the public shareholders, but rather was pursuing a private transaction in which it would participate with the Schadens in the merger. In a subsequent telephone conference involving only counsel for the Schadens and counsel for the shareholder, the Schadens (through counsel) declined to participate in such a transaction. From May 21 to June 21, Brobeck negotiated the terms of the merger agreement with counsel for the Schadens. In particular, Brobeck and the Schadens' counsel negotiated issues relating to conditions to closing, the scope of representations and warranties, termination relating to the board's fiduciary duties and termination fees. On June 18, 2001, the special committee held a teleconference. On the teleconference, representatives of Brobeck discussed in detail the terms of the merger agreement. In addition, during the course of this meeting, representatives of Tucker Anthony presented a detailed oral presentation and analysis of the fairness of the proposed merger consideration to our public shareholders from a financial point .of view. With the exception of noting the higher offer price of $8.50 per share, and that the higher offer price was still within the indicated range, this presentation did not differ materially from the presentation made to the special committee on May 29. On June 21, 2001 the special committee, representatives of Brobeck and representatives of Tucker Anthony held a teleconference. At this meeting, the special committee received an oral fairness opinion (and a written opinion to the same effect was subsequently delivered) from Tucker Anthony that as of June 21, 2001, and based on and subject to the assumptions, limitations, and qualifications contained in that opinion (including the revised management projections), the merger consideration each of our public shareholders will have the right to receive in the merger is fair, from a financial point of view, to that shareholder. The special committee then unanimously determined to approve the merger agreement and declare that the merger was fair to and in the best interests of our public shareholders, and recommended that the board approve the merger agreement and cause us to execute and deliver the merger agreement. The special committee then adjourned and a meeting of the board of directors was convened immediately thereafter. A t such meeting the independent members of our board unanimously resolved to approve the merger agreement and the merger and recommend the merger to our shareholders. We then entered into the merger agreement with Firenze. We issued a press release after the market closed on June 21, 2001 announcing the execution of the merger agreement. On July 2, 2001, the merger agreement was amended and restated to clarify (1) that options held by the Schadens and their affiliates would be assumed by the surviving company and that options held by non-affiliates would receive the net merger consideration, and (2) that preferred stock held by the Schadens and their affiliates would not be redeemed. This amendment was intended merely to conform the merger agreement to the understanding of all parties regarding these issues. On September 4, 2001, our board received a letter from the shareholder who contacted Richard E. Schaden on June 6 , 2001, which indicated a willingness to make an`offer for all outstanding minority shares only if certain conditions could be met by us. The special committee met telephonically on September 5 , 2001 to discuss this letter. At this meeting it was determined 12

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that on its face the letter requires certain conditions which could not be granted without the consent of a majority of our shareholders. The special committee then contacted Richard E. Schaden to determine whether the majority shareholders would negotiate these conditions. The Schadens, consistent with their prior statements, were not interested in pursuing any minority arrangements with the shareholder. The special committee then contacted the shareholder to determine whether the conditions set forth in the letter were open for negotiation, obtain more specifics regarding the proposed conditions and assess the financial ability of the shareholder to consummate any offer. While the shareholder indicated a willingness to negotiate, no specifics were discussed. The special committee felt that in order to pursue the shareholderk willingness to make an offer it would require specifics regarding the shareholder's conditions in order to determine whether it is in a position to negotiate any such conditions and evidence .of financial ability. On September 10, 2001, the special committee sent a letter to this effect to the shareholder. In response to the special committee's request, the shareholder provided it with certain evidence of his financial ability and with the specifics of his conditions to make an offer. In a letter dated October 2, 2001, the shareholder informed the special committee that he would make an offer of $10.63 per share for all of the minority shares, only if he were granted a put option from US on terms similar to those in the Levine Leichtman loan. The special committee held a meeting on October 8, 2001 to discuss this proposal. The special committee initially reviewed and analyzed the financial and other implications of the proposal on Quizno's, and requested Tucker Anthony to do a more comprehensive financial analysis. In addition, the chairman of the special committee met with management and Levine Leichtman and detailed the proposed condition. Subsequent to this meeting, and after discussions with counsel, Levine Leichtman informed the special committee that the proposed condition violated the terms of its loan facility with us and that they would not consent to the shareholderk condition. On October 22, 2001, the special committee received a detailed financial analysis from Tucker Anthony of the put option proposal and discussed it in detail. Based upon its evaluation and the response of Levine Leichtman, the special committee informed the shareholder that we are unable to agree to the condition as proposed, and that the shareholder may negotiate directly with Levine Leichtman to try to reach an acceptable structure to permit an acceptable definitive offer to be made. As the shareholder's condition has not been met, at this time the shareholder has not made a firm offer. Another shareholder filed a Schedule 13D with the SEC on August 24, 2001 indicating ownership of approximately 9.7% of our outstanding common stock. Both shareholders have expressed dissatisfaction with the merger price to be paid to the minority shareholders. On September 17, 2001, the merger agreement was amended to extend the termination date to October 31, 2001. On October 18, 2001, the merger agreement was amended to extend the termination date to December 31, 2001. Recommendations of the Special Committee and Board of Directors

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On June 21, 2001, the special committee unanimously determined that the merger and the merger agreement are fair to and in the best interests of our public shareholders and recommended that our board and our shareholders adopt and approve the merger agreement and the merger.
On June 21, 2001, the disinterested members of our board, Messrs. Bromberg, Todd and Lawrence, on the unanimous recommendation of the special committee comprised entirely of the disinterested members of our board, unanimously determined that the merger and the merger agreement are fair to and in the best interests of our public shareholders and recommended that our shareholders adopt the merger agreement and approve the merger. Richard E. Schaden and Richard E Schaden did not attend the board meeting. Frederick Schaden attended the board meeting for quorum purposes, but abstained from discussing and voting with respect to the merger and the merger agreement.

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Reasons for the Merger and Fairness of the Merger In reaching its determinations, the special committee relied on its knowledge of our business, information provided by our officers, as well as the advice of its financial advisors and legal counsel. In reaching its decision, the special committee considered a number of factors, including the following factors, each of which in the view of the special committee supported such determination:
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the historical trading activity of our common stock, including the fact that the average daily trading volume of our common stock for the six months prior to June 21, 2001 was 1,320 shares per day; we have a small public float and we have limited prospects for creating institutional interest in our stock or coverage by analysts; our market capitalization was approximately $19 million as of June 21, 2001; our stock price has not performed well since our 1994 initial public offering priced at $5.00 per share. During that period our common stock closed at a high of.$9.125 per share in August 1999 and at a low of $2.75 per share in June 1995. During the six month trading period ended June 21, 2001, the shares closed at a high of $8.00 per share in January 2001, and at a low of $7.12 per share in April 2001. We believe that since our tender offer, trading prices have been inflated as a result of the public's belief that we would complete a second step transaction to our tender offer; public companies with low market capitalization and low float may have more difficulty in attracting financing; the proposed merger consideration of $8.50 per share constitutes a 12% premium over the average closing price for our common stock on the Nasdaq SmallCap Market for the six month period ended May 21, 2001, the date before we announced we had received an offer from the Schadens and 31% over the average closing price for the six month period prior to the announcement of our tender offer; the written opinion of Tucker Anthony delivered to the special committee on June 21, 2001, stating